Synopsis
WazirX has decided to implement a “socialized loss” strategy following a major cyberattack that compromised nearly half of its user funds. According to a statement from WazirX, this approach aims to spread the financial impact across all users, enabling them to access a portion of their assets immediately while maintaining the possibility of further recovery
Amid WazirX’s recent security breach, which saw the theft of approximately $230 million, the exchange’s decision to distribute the loss among all users has sparked intense criticism. Sumit Gupta, Co-Founder of CoinDCX, has condemned the move, labeling it as “utter nonsense.”
Sumit Gupta voiced his criticism on X (formerly known as Twitter), stating, “The first contribution to losses should ALWAYS come from the Company (i.e. WazirX in this case) and the treasury and assets the company holds. I have not seen any such commitment around this from the company side, instead making customers directly absorb the 45% losses is utter nonsense. The poll options are also framed in a manner to protect the business first and not the customers.”
WazirX’s decision to implement a “socialized loss” strategy comes after the exchange experienced a significant cyberattack that compromised nearly half of its user funds. According to a note from WazirX, this approach aims to distribute the financial impact across all users, allowing them to access a portion of their assets immediately while retaining the potential for further recovery. The exchange argues that this method provides a quicker resolution compared to traditional recovery processes.
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TOP COIN SETSAI Tracker0.00% BuyCrypto Blue Chip – 5-0.61% BuyDeFi Tracker-0.63% BuyBTC 50 :: ETH 50-2.01% BuyWeb3 Tracker-4.80% BuyTOP COINS (₹) Tether84 (-0.05%)BuyEthereum279,818 (-1.33%)BuyBNB48,055 (-3.25%)BuyBitcoin5,598,860 (-3.85%)BuySolana15,232 (-5.21%)BuyHowever, Gupta’s critique highlights a broader concern about the handling of security breaches in the cryptocurrency space. He emphasises that such incidents should prompt companies to first utilise their own resources and reserves to mitigate losses. The decision to shift the burden onto users, according to Gupta, not only disregards the well-being of the community but also sets a troubling precedent for other players in the industry.
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View Details »Gupta also questions the fairness of the decision-making process, suggesting that the poll options provided to users may be skewed to favour WazirX’s business interests over customer welfare.
He argues that a company should be prepared to shoulder the risks associated with its operations, particularly in cases involving significant financial losses due to security breaches.
Meanwhile, WazirX responded to the criticism with a statement clarifying the intent behind their recent poll. “We appreciate your active participation in our recent poll from 27 July 2024. We want to clarify that this poll is a preliminary step to understand your opinions and is not legally binding upon the users or the WazirX platform,” the statement read.
WazirX assured its users that this poll is not final and was designed solely to gather feedback and that the company is committed to devising a plan that aligns with the community’s best interests.
The exchange also announced plans to release a feedback form soon, aiming to gather more detailed insights from users.
“Our team is currently reviewing all your inputs to devise a plan that truly aligns with the community’s best interests,” WazirX stated. “We aim to develop a plan that incorporates your collective voice and ensures a fair and effective outcome.”
Earlier on Saturday, following the cyberattack that resulted in the theft of approximately $230 million, equivalent to 45% of user funds, WazirX announced it is implementing a “socialized loss” strategy.
What is socialized loss strategy?
Distribution of funds:
55% of user crypto assets will be made available for trading and withdrawals, depending on the selected option. The remaining 45% will be converted to USDT-equivalent tokens and locked.
Balanced portfolio
For the unlocked 55%, WazirX will create a balanced portfolio using a basket of unaffected crypto assets available on the platform. If the 55% includes affected tokens, they will be replaced with unaffected crypto assets.
Portfolio valuation
The value of the unlocked portfolio will be calculated based on average prices from and select global exchanges as of July 21, 2024
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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